I am moving on to computerised book keeping and have my Trial balance at hand to enter as opening balance .(I have purchased Accountz software) I just need some help please...
Goodwill Amortisation-- This is classed as a revenue but what account and where should i place it.
Dividends is a liabilty- does it come under 'loan' or do i create a new account for dividends
Also on the Accountz software under each Asset there is a depreciation account, however further down in the liabilty section there are futher depreciation accounts. Do i fill out the deprecation in the liabilty section??
Depends if the goodwill is being calculated under UKGAAP or IFRS.(see FRS10 for UK GAAP or IAS36 for IFRS).
Amortisation is however not revenue.
Assuming that you are working to IFRS (as this sounds as though its from a study text) Goodwill amortisation is an impairment of the goodwill asset.
Reduce the carrying value of goodwill from the top part of the balance sheet matched by a reduction in capital (the impairment means that the business is worth less than it was).
Dividends are a post tax distribution of profits.
A loan would have appeared pre tax under current and non current assets and with loan interest as an expense through the P&L (so adjusting retainied earnings in the capital account).
For the dividends take from Retained Earnings to a dividends payable reserve / Directors Loan Account (if directors dividend).
No idea at all about Accountz software. The above is just something like what the software should be attempting to achieve but as I say, the major variable here is under what accounting standards you are working (IFRS / IFRS SME / UKGAAP).
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
p.s. Just in case I'm wrong about the accounting standards that you are working to, under UK GAAP amortisation is treated in a similar way to depreciation based on the rebutable presumption that Goodwill has a finite life not exceeding 20 years.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'm not sure how the goodwill has been calculated, this is from our accountant- could ask him.
I had read that amortisation is a revenue and should be allocated to P & L Account. So is amortisation a depreciation of goodwill? If so would I have to create a new account in the liabilty section to account for amortisation.
what is the difference between depreciation and amortisation?
Dividends ( i'm assuming it's dividends it states 'balance brought forward Mr R Hames)-- This is for the director and is in CR. As this is for opening balance do i still have to take it from retained earnings or can i just enter it straight away in directors loan account as opening balance.
Also shared up capital where sould i enter the Cr balance?
I must admit I'm a bit thown using accountz software coming from sage, i'm sure i'll get my head round it all.
p.s. Just in case I'm wrong about the accounting standards that you are working to, under UK GAAP amortisation is treated in a similar way to depreciation based on the rebutable presumption that Goodwill has a finite life not exceeding 20 years.
You've got me worried now Ghislane that amortisation could be considered revenue.
It sounds so wrong but I've now got this overwhelming desire that I need to see it written down somewhere.... Back in a min.
......
Nope... Everything that I've read concurs with my thinking that Amortisation is an expense to be recognised through the P&L.
No matter where I look amortisation is never revenue, rather it is recorded as an expense in the P&L as per depreciation. Which is the way that my little brain has always thought of it.
Doesn't mean that I'm not missing something (a lot more grey matter between the ears would me nice as what little I've got is full) so if your accountant gives you some viable reasoning then I expect that he's right and I'm wrong.
My way works, it agree's to the books and FRS10 and IAS36 but I know that there is invariably more than one right answer and I would be interested to know how your accountant comes up with amortisation of intangibles (such as goodwill) as revenue.... Even saying that sounds wrong though.
Right, you've now left me with a pile of text books next to me and scratching my head looking at various pages on the net trying to fathom this.
talk tomorrow,
kind regards,
Shaun.
p.s. just about to press submit and it occured to me... where you read this didn't say Revenue Expense did it and you're reading that as Revenue rather than a P&L Expense?
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
It wasn't our accountant who said it was revnue---it was Google ( lol ) i know i shouldnt really go through google to get viable information but wanted an answer fast. Obviously not the right one.
if you think about it when you bought the asset you
Dr Asset Cr Bank (or equivalent)
as you debreciate the asset you
Dr Depreciation Cr Asset
Until of course there's no asset left.
The key is to always think about what you are attempting to achieve which in this case is wastage of the asset and as the asset is a debit the depreciation used to consume it must credit the asset making the depreciation itself a debit.
simples.
HTH,
Shaun.
p.s. edited because I knew what I was talking about in the last paragraph but somehow between my brain and the post it read completely differently.
-- Edited by Shamus on Saturday 4th of August 2012 09:17:12 AM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
no worries, I do it all of the time but I am very picky over the sites that I use information from and even then I often find myself not believing what I read and getting confirmation from several other sources.
Did I tell you about my son being taught that the black death was spread around Europe of Beavers because some miscreant had put that on wikipedia and Peters teacher had just taken information from there without reading it properly first.
The issue in accounting terms is that Revenue, impairments, Goodwill, etc. are problem areas where the various standard setting bodies don't agree on treatment so reading things on the interweb if you picked up a discussion say related to a discussion of the rules under FASB over in the states they would be at odds with the rules as applied under IFRS or UKGAAP.
Sometimes using the internet it almost seems as though you need to know the answer before you search for it.
I just did another quick search of the internet and read a few more amortisation discussions and found one that was quoting from books written in 1995 but of course things like impairments are hot topics at the moment when worldwide adoption of IFRS has hit problems due to arguements between FASB and IASB of matters such as the adoption of the expected losses model.
Anyway, back to the original question and working to UKGAAP per FRS10. If the Goodwill is to be Amortised (as mentioned previously the presumption is rebuttable) then treat the Amortisation as a period expense through the P&L.
Such a simple question and we end up discussing the problems facing the standards setting bodies over international convergeance... Only on this site
Have a good weekend Ghislane and talk soon,
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I had written down on a piece of paper what I read, but for the life of me couldn't find it after posting the thread.
Another question how can i enter the opening balance for depreciation so it's CR everytime i enter the balance on revelent account for opening balance it's appears to be DB
ok, I'm assuming that the Plant & Machine of £931 is the already part depreciated opening balance that you are attempting to enter.
second assumption is that the depreciation is the current year depreciation with no historic element to it.
So, after stating the above assumptions I would expect to see
Dr Plant & machine the original cost of the Plant and machinery (not the £931 unless that really was the original cost) Cr Plant and Machinery with the historic depreciation figure that brings the carrying value to £931
You do not take the historic depreciation to the depreciation account.
In VT you would use Creditors, Opening Balance contra for the flip side of the transactions. Not sure how you would do it with Acccountz software.
For the current year depreciation you would enter
Dr Depreciation £408 Cr Plant and Machinery £408
The effect there is that £408 is taken to P&L as an expense which adjusts the profit which is carried to the capital account in the lower half of the balance sheet to match the reduction in assets in the upper part of the balance sheet (so everything balances).
Do the same for Motor Vehicles as you did with Plant.
HTH,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Don't worry Ghislane, I don't think that your thick at all.
Questions like this keep me on my toes expechially when you chucked Goodwill as Revenue into the pot which makes me think have I missed something rather than assuming that you have got anything wrong.
Keep asking the questions as one day in the not too far distant future you'll be the person sitting helping someone get to grips with this.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Your assumtion is spot on, however is there not a way to enter the details from the Trial balance straight onto Accountz software without having to find original cost of asset and depreciating it to £931.00
Sorry was away from the PC for a bit doing my Saturday morning ringing around making sure that the relatives are all still alive.
Yes, you could enter the already depreciated figure as an opening balance but in doing so you lose the historic position in your books.
Fingers crossed following the above method you now have strong foundations with which to move your books forwards.
Glad that I could offer some assistance,
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
So if one doesn't answer the telephone they are presumed deceased? lol.
And I'm straight off to the solicitors via the BMW showroom
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
